We all make decisions that we end up regretting in life, but some financial decisions we make can leave us with our hands tied when it comes to making future purchases. When one accumulates a large amount of debt any future dreams they have may seem obsolete, but they do not have to be. There are two options a person has in order to relive themselves of their debt, bankruptcy or debt settlement. How is a person to know which one is right for them? What are the pros and cons of each method? In the following article we will examine both bankruptcy and debt settlement.
Lets start with defining what both a debt settlement and bankruptcy consist of. Debt settlements or debt negotiations are where both the debtor and creditor reach an agreement to reduce the debtor’s balance. The debtor agrees to pay the settled upon monthly payment and the creditor agrees to reduce their balance as long as they (debtor) stay consistent with their payments. Bankruptcy is a process where the debtor can wipe the slate of their debt and start fresh. With the help a lawyer the consumer will have their debts eliminated.
There are some pros and cons to both processes with debt settlements some of the positive notes are one, you will save money in the long run. Also you may be able to remove some of the negative marks on your credit, just check with the creditor, most are willing to work with you. Perhaps one of the more satisfying effects of debt settlement is the riddance of the constant phone calls from the creditors. With the good comes the bad and a debt settlement may stay on you report until you make the attempt to contact the collector and have them list you as paying off your debt in full. A debtor’s saving should also be reported to the IRS, but don’t kill the messenger here.
As with debt settlements, when filling bankruptcy your phone will stop ringing. Bankruptcy will also allow you a little peace of mind when it comes to rebuilding your credit, as most blemishes start to fall in a few months and your credit will be back on track with in a few years. A person who files for bankruptcy will be able to get a credit card and qualify for auto loans,The yellow chakra, but be careful to remember the negatives they (credit cards) can have. Until your credit gets back on track filling bankruptcy may cause you to lose your old credit cards, this is just one of the draw backs of bankruptcy.
Another negative of filling bankruptcy is that in the first few years getting a mortgage may be extremely tough. Before filing be sure to recognize that not every debt will be removed, research your student loans as they may not be able to be squashed. In many circles bankruptcy is frowned upon, so many people are embarrassed by it.
Now matter which avenues you choose to go down just know that there is hope to resolving your credit issues.
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